Due to popularity of high frequency algorithmic trading, reducing latency in order acknowledgment times is becoming important. The chances of filling trade orders are higher if the trade order reaches the exchange quicker. It is generally believed that profits are correlated with order fill rate so the greater the fill rate the greater the profits.
Several methods have been proposed to reduce the latency, including faster transmission lines, kernel bypass methods for transmission and reception of data at the trading engine, and physical co-location of the trading engine at the exchange facility. While such methods are very effective in getting the trade order across to the exchange very quickly, they do not take into consideration the latency introduced at the exchange itself due to heavy trading volumes. This latency serves to delay order acknowledgment times on certain exchange ports (also called flows) at certain times. The delays are temporal and random in nature. Trading engine software typically uses a ‘round-robin’ algorithm to distribute trade orders evenly across multiple exchange ports. However, this can increase order acknowledgment times on those exchange ports that have a heavy load on them particularly during busy periods.
Therefore, it would be beneficial to have improved systems and methods for reducing latency in order acknowledgment times, and especially systems and methods which take into consideration the latency introduced at the exchange itself.